Section 144 of the Indian Contract Act, 1872: Guarantee Subject to Co-Surety Joining
Section 144 deals with a guarantee given on the express condition that the creditor will not act upon it until another person joins the guarantee as a co-surety. If the specified person does not join, the conditional guarantee is not valid.
Text of Section 144
Where a person gives a guarantee upon a contract that the creditor shall not act upon it until another person has joined in it as co-surety, the guarantee is not valid if that other person does not join.
The statutory text remains part of Chapter VIII of the Indian Contract Act, 1872, which deals with indemnity and guarantee. The official central legislation text is available from India Code - Indian Contract Act, 1872.
Meaning of Section 144
The section applies where a proposed surety does not give an unconditional guarantee. Instead, the surety agrees to be bound only if another identified or contemplated person also joins as a co-surety. The joining of that other person is therefore a condition attached to the guarantee. If the condition is not fulfilled, Section 144 states that the guarantee is not valid.
The person who gives the guarantee.
The person to whom the guarantee is given.
The person whose default is covered by the guarantee.
Another surety sharing responsibility for the guaranteed obligation.
These basic concepts flow from Section 126 of the Indian Contract Act, 1872, which defines a contract of guarantee, surety, principal debtor and creditor.
Essential Requirements
For Section 144 to operate, the guarantee must be conditional upon another person joining as co-surety. The creditor must not be entitled, under the agreed condition, to treat the guarantee as operative before that joining occurs. If the contemplated co-surety never joins, the statutory consequence is that the guarantee is not valid.
Practical Effect
A creditor should verify the terms on which each surety signed the guarantee. Where a surety signs only on the basis that another person will also become a co-surety, proceeding without fulfillment of that condition can raise the direct statutory bar in Section 144. The written guarantee, correspondence and surrounding contractual documents may therefore be important in establishing whether the guarantee was conditional.
Related Provisions on Guarantee
Section 144 should be read with the surrounding provisions governing guarantees, including Section 142 on guarantee obtained by misrepresentation, Section 143 on guarantee obtained by concealment, and Section 145 on the implied promise to indemnify the surety.
This page provides general legal information. Application of Section 144 depends on the terms and evidence in the particular transaction.